Medicare and social security are mandatory spending categories funded by which type of taxes that are withheld from your paycheck?

Question: Medicare and social security are mandatory spending categories funded by which type of taxes that are withheld from your paycheck?

Answer: It is funded by a compulsory payroll tax called the Federal Insurance Contributions Act (FICA) tax.

Medicare and social security are mandatory spending categories funded by which type of taxes that are withheld from your paycheck?

Explanations:

Key Terms

compulsory payroll tax—An automatic tax collected from employers and employees to finance

specific programs.

Federal Insurance Contributions Act (FICA) tax—Provides benefits for retired workers and

their dependents as well as for disabled workers and their dependents. Also known as the Social

Security tax.

withholding (“pay-as-you-earn” taxation)—Money, for example, that employers withhold from

employees’ paychecks. This money is deposited for the government. (It will be credited against

the employees’ tax liability when they file their returns.) Employers withhold money for federal

income taxes, social security taxes, and state and local income taxes in some states and localities.

Summary

The Social Security Act was passed in 1935 at the height of the Great Depression when millions

of Americans were unemployed. The elderly were especially vulnerable to poverty. President

Roosevelt called for the creation of a program designed to support the elderly. The program was

so successful that it is still in effect today in an expanded form.

Social Security today provides a regular income to retired and disabled workers and the

unemployed. It is funded by a compulsory payroll tax called the Federal Insurance

Contributions Act (FICA) tax. Withholding means that employers deduct, or hold back, a set

amount of money from each paycheck for the government. Workers pay the tax as they earn their

incomes. This system is known as “pay-as-you-go” or “pay-as-you-earn.” Every employed U.S.

citizen is required to contribute to Social Security.

Activity 1

In the 1930s, Social Security was a new idea. Read the opinions below and decide whether the

person would support or oppose Social Security. Write Support or Oppose on the lines provided.

1. “It seems to me that everyone should be able to pull his own weight.” oppose

2. “I worked my whole life, but at age 60, I lost everything in the Depression.”

support

3. “Americans have the right to enjoy their retirement without worrying about how

they will pay the rent.” support

4. Why do I have to pay taxes so that someone who didn’t think ahead can live well?

I’ve got my own kids to feed.” oppose

Activity 2

Fill in the chart below with at least two causes and two effects of the Social Security Act. Then

label the effects as positive or negative.

Medicare and social security are mandatory spending categories funded by which type of taxes that are withheld from your paycheck?

Activity 3

Imagine that you are living during the Great Depression and you have concerns about the

implications of Social Security. On another sheet of paper, write a short editorial on the Social

Security Act of 1935. In your essay, explain who you are, what your concerns are, and the

reasons you support or oppose Social Security and the FICA tax.

Medicare and social security are mandatory spending categories funded by which type of taxes that are withheld from your paycheck?

Medicare and social security are mandatory spending categories funded by FICA taxes that are withheld from your paycheck.

A tax is a obligatory financial fee or a few different kind of levy imposed on a taxpayer with the aid of a governmental organization that allows you to fund authorities spending and diverse public prices

Taxes are mandatory contributions levied on individuals or businesses through a central authority entity—whether or not nearby, local, or national. Tax sales finance government sports, consisting of public works and services consisting of roads and colleges, or applications including Social protection and Medicare.

Understanding employment taxes

Employers must deposit and report federal employment taxes. Some of these taxes are paid by both the employer and the employee, while others are paid by the employer. Examples include federal income tax, Social Security tax, Medicare tax and federal unemployment tax.

Federal income tax

Employers generally must withhold federal income tax from employees' wages. To figure out how much tax to withhold, use the employee's Form W-4, Employee’s Withholding Certificate, the appropriate method and the appropriate withholding table described in Publication 15-T, Federal Income Tax Withholding Methods.

Employers may want their employees to use the Tax Withholding Estimator tool to estimate the federal income tax they want their employer to withhold from their paycheck.

Social Security and Medicare taxes

Employers generally must withhold Social Security and Medicare taxes from employees' wages and pay the employer share of these taxes.

Social security and Medicare taxes have different rates and only the Social Security tax has a wage base limit. The wage base limit is the maximum wage subject to the tax for the year. Determine the amount of withholding for Social Security and Medicare taxes by multiplying each payment by the employee tax rate.

For the current year social security wage base limit and Social Security and Medicare tax rates refer to Publication 15, (Circular E), Employer's Tax Guide.

Additional Medicare tax

In addition, employers are responsible for withholding the 0.9% Additional Medicare tax on an employee's wages and compensation that exceeds $200,000 in a calendar year. You must begin withholding Additional Medicare tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. There is no employer match for the Additional Medicare tax.

Federal unemployment (FUTA) tax

Employer’s report and pay FUTA tax separately from federal income tax, and Social Security and Medicare taxes. You pay FUTA tax only from your own funds. Employees do not pay this tax or have it withheld from their pay. Refer to Publication 15 and Publication 15-A, Employer's Supplemental Tax Guide for more information on FUTA tax.

References

Worksheet Solutions - IRS: https://apps.irs.gov/app/understandingTaxes/whys/thm02/les04/media/ws_ans_thm02_les04.pdf

Understanding employment taxes: https://www.irs.gov/businesses/small-businesses-self-employed/understanding-employment-taxes